Opinion: Hot issue - Should businesses only engage in charity if it benefits investors?

Nestle chief Peter Brabeck-Letmathe said in a recent speech that companies should only get involved in charity if it made money for investors: creating jobs and making products were their primary obligations to the community.

YES - LUCY VARCOE, membership manager, Business in the Community

Brabeck-Letmathe has resurrected an old argument by saying companies should not feel obliged to "give back" to the community.

Leading companies are moving towards 'strategic philanthropy', and can increasingly show bottom-line benefits for both the community and their investors. But the question is whether there is still a place for charity that doesn't show a clear business benefit.

There are two answers. The first, which is intuitive rather than measurable, is that all charitable donations benefit investors in the long term. The UK retailer Marks & Spencer has always said "prosperous back streets mean prosperous high streets".

The second answer is to consider the evidence that shows leading companies are continuing to give to charity, even in difficult economic conditions.

Corporate don-ations have risen in line with inflation for the past 10 years. Indeed, Nestle's UK arm reports to our Per Cent Club that it donates 1per cent of pre-tax earnings. Why? Because companies and their investors, employees, customers and suppliers are all part of one community. Business does not and cannot operate in a vacuum - investors will benefit if their company plays a part in supporting it.

NO - JOHN HALL, corporate relations manager, Rio Tinto

Corporate responsibility has a moral dimension, and there are occasions when corporate giving is appropriate - the Asian tsunami is an obvious example. But Brabeck-Letmathe is right to say companies are accountable to their shareholders for every dollar. As a rule, all corporate expenditure should return shareholder value.

Since 1996, Rio Tinto has surveyed a wide range of stakeholders in a number of countries. They tell us we should focus on 'the business of the business' - projects to which we can add value and that are relevant to our business.

But corporate responsibility is not charity. The challenges of sustainable development will never be tackled if companies and communities don't engage with each other.

Our group has developed a series of partnerships with NGOs to implement this approach, focused on environmental, educational and indigenous organisations.

All are genuine partnerships, with both parties contributing technical skill and resources to jointly managed projects.

The long-term outcome is to improve our reputation because communities see us working with them. This is the point of corporate responsibility - it creates value for both shareholders and communities.

NO - KURT HOFFMAN, director, Shell Foundation

But this holds only if a business continues to act like a business when it gets involved in charity. That is because the point of charity is to maximise the public good. When a business just gives its money to needy causes, it generates far fewer (and smaller) social benefits than if it deploys its knowhow, convening power and networks in partnership with a results-oriented civil society group.

In essence, business can and should generate specific, financially viable solutions to social problems that it actually knows something about from its day-to-day activities. In doing so, corporate philanthropy will generate much higher social returns than straightforward charitable giving.

The Shell Foundation has correspondingly evolved into a type of social merchant bank working in international development. The reason is simple - by investing our funds, applying business thinking and instilling these values in our programme partners, we have shown a greater developmental return on our investment. This would not be possible if we simply gave our money away.

The point that civil society, business and its investors should bear in mind is that 'charity', rather than 'benefit', is perhaps too narrowly defined.

NO - GARY CAMPKIN, head of the CBI's international group

Many companies take the idea of responsible business behaviour well beyond their legal obligations. That bit, over and above the legal necessities, is what has come to be called 'corporate social responsibility'.

It's an evolving concept, but for some companies the principles have been around for a century. Are they wrong? No. It may be about promoting the business or enhancing its reputation - there's nothing wrong with that - or it may be simple old-fashioned philanthropy.

But equally, no company should be criticised for what it doesn't do in this area. They must be free to balance their priorities and budgets.

Some voices outside business are pushing for legislation to make CSR obligatory. That would be a mistake. It would stop being an activity willingly undertaken and become another cost to the bottom line that the finance director would feel a duty to minimise. It would impose a burden on smaller firms in particular.

Every company operates in unique circumstances and must be free to make the choices that best suit it. Regulations would only set a minimum standard beyond which companies might see no need to go.

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